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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934

For the quarterly period ended: September 30, 2001

Commission file number: 1-11083

BOSTON SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 04-2695240
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

One Boston Scientific Place, Natick, Massachusetts 01760-1537
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (508) 650-8000
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- --------------------------------------------------------------------------------

Former name, former address and former fiscal year, if changed since last
report.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
----- -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.

Shares Outstanding
Class as of September 30, 2001
----- ------------------------

Common Stock, $.01 Par Value 403,341,165

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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)

September 30, December 31,
In millions, except share and per share data 2001 2000
- --------------------------------------------------------------------------------

Assets
Current assets:
Cash and cash equivalents $ 99 $ 54
Short-term investments 6
Trade accounts receivable, net 391 361
Inventories 324 354
Other current assets 213 217
------------------------
Total current assets 1,027 992

Property, plant and equipment 1,059 942
Less: accumulated depreciation 451 375
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608 567

Excess of cost over net assets acquired, net 860 821
Technology - core and developed, net 690 507
Patents, trademarks and other intangibles, net 410 343
Other assets 169 197
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$ 3,764 $ 3,427
========================

See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
(Unaudited)

September 30, December 31,
In millions, except share and per share data 2001 2000
- --------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Current liabilities:
Commercial paper $ 74 $ 56
Bank obligations 274 204
Accounts payable and accrued expenses 478 419
Other current liabilities 115 140
------------------------
Total current liabilities 941 819

Long-term debt 859 574
Other long-term liabilities 100 99

Commitments and contingencies

Stockholders' equity:
Preferred stock, $ .01 par value - authorized
50,000,000 shares, none issued and outstanding
Common stock, $ .01 par value - authorized
600,000,000 shares, 414,922,050 shares issued
at September 30, 2001 and December 31, 2000 4 4
Additional paid-in capital 1,216 1,210
Treasury stock, at cost - 11,580,885 shares
at September 30, 2001 and 15,074,381 shares
at December 31, 2000 (210) (282)
Deferred compensation (12) (15)
Retained earnings 969 1,116
Accumulated other comprehensive loss (103) (98)
------------------------
Total stockholders' equity 1,864 1,935
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$ 3,764 $ 3,427
========================

See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended Nine months ended
September 30 September 30
In millions, except per share data 2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------

Net sales $ 670 $ 652 $ 1,996 $ 2,026
Cost of products sold 214 200 704 630
--------------------- ---------------------
Gross profit 456 452 1,292 1,396

Selling, general and administrative expenses 232 216 687 644
Amortization expense 30 23 105 69
Royalties 10 10 28 31
Research and development expenses 72 48 199 146
Purchased research and development 10 277
Restructuring charges 23 4 23
--------------------- ---------------------
354 320 1,300 913
--------------------- ---------------------
Operating income (loss) 102 132 (8) 483

Other income (expense):
Interest expense (16) (16) (46) (56)
Other, net 1 3 2 18
--------------------- ---------------------

Income (loss) before income taxes 87 119 (52) 445
Income taxes 29 34 67 132
--------------------- ---------------------
Net income (loss) $ 58 $ 85 $ (119) $ 313
===================== =====================
Net income (loss) per common share - basic $ 0.14 $ 0.21 $ (0.30) $ 0.77
===================== =====================

Net income (loss) per common share - assuming dilution $ 0.14 $ 0.21 $ (0.30) $ 0.76
===================== =====================

See notes to unaudited condensed consolidated financial statements.

Boston Scientific Corporation and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)

In millions, except share data Nine Months Ended September 30, 2001
- ------------------------------------------------------------------------------------------------------------------------------------

Common Stock
--------------------- Additional Accumulated Other
Shares Issued Par Paid-In Treasury Deferred Retained Comprehensive
(In thousands) Value Capital Stock Compensation Earnings Income (Loss) Total
---------------------------------------------------------------------------------------------

Balance at December 31, 2000 414,922 $4 $1,210 ($282) ($15) $1,116 ($98) $1,935
Net income (119) (119)
Foreign currency translation
adjustment (2) (2)
Issuance of common stock 2 75 (8) (27) 42
Cancellation of restricted stock (3) 2 (1) (2)
Tax benefit relating to incentive
stock option and employee stock
purchase plans 4 4
Amortization of deferred compensation 9 9
Unrealized gains on derivative
financial instruments, net (2) (2)
Unrealized gains on equity
investments, net (1) (1)
---------------------------------------------------------------------------------------------
Balance at September 30, 2001 414,922 $4 $1,216 ($210) ($12) $ 969 ($103) $1,864
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See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30
In millions 2001 2000
- -------------------------------------------------------------------------------

Cash provided by operating activities $ 328 $ 562

Investing activities:
Purchases of property, plant and equipment, net (94) (51)
Acquisitions of businesses, net of cash acquired (548)
Payments for acquisitions of and/or investments
in certain technologies, net (65) (25)
Sales of available for sale securities 20 15
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Cash used for investing activities (687) (61)

Financing activities:
Net increase (decrease) increase in commercial paper 18 (179)
Net proceeds from (payments on) borrowings
on revolving credit facilities 363 (242)
Proceeds from issuances of shares of common stock 28 28
Acquisitions of treasury stock (135)
Other, net (5) 12
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Cash provided by (used for) financing activities 404 (516)
Effect of foreign exchange rates on cash (4)
-------------------
Net increase (decrease) in cash and cash equivalents 45 (19)
Cash and cash equivalents at beginning of period 54 64
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Cash and cash equivalents at end of period $ 99 $ 45
===================

See notes to unaudited condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2001

Note A - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Boston
Scientific Corporation (Boston Scientific or the Company) have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto incorporated by reference in Boston
Scientific's Annual Report on Form 10-K for the year ended December 31, 2000.

Certain prior years' amounts have been reclassified to conform to the current
year presentation.

Note B - Comprehensive Income

For the three months ended September 30, 2001 and 2000, the Company reported
comprehensive income of $51 million and $84 million, respectively. For the nine
months ended September 30, 2001 and 2000, the Company reported a comprehensive
loss of $124 million and comprehensive income of $306 million, respectively.

Note C - Earnings Per Share

The following table sets forth the computations of basic and diluted earnings
per share:

Three Months Nine Months
Ended September 30, Ended September 30,
(In millions, except share and per share data) 2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------

Basic:
Net income (loss) $ 58 $ 85 ($119) $313

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Weighted average shares outstanding (in thousands) 402,507 405,176 400,711 406,643
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Net income (loss) per common share $ 0.14 $ 0.21 ($0.30) $0.77
=================================================

Assuming dilution:
Net income (loss) $ 58 $ 85 ($119) $ 313
-------------------------------------------------
Weighted average shares outstanding (in thousands) 402,507 405,176 400,711 406,643

Net effect of dilutive stock-based compensation (in thousands) 4,215 3,002 3,363
-------------------------------------------------
Total (in thousands) 406,722 408,178 400,711 410,006
-------------------------------------------------
Net income (loss) per common share $ 0.14 $ 0.21 ($0.30) $ 0.76
=================================================

For the nine months ended September 30, 2001, approximately 4 million potential
common shares were not included in the computation of earnings per share,
assuming dilution, as they would have been anti-dilutive.

Note D - Borrowings and Credit Arrangements

During the third quarter of 2001, the Company refinanced its $600 million
364-day credit facility that was due to expire in September 2001, with a new
$600 million credit facility that expires in August 2006. At September 30, 2001,
the Company had approximately $1.6 billion in revolving credit facilities. The
revolving credit facilities consist primarily of the new $600 million credit
facility and a $1.0 billion credit facility that expires in June 2002.

Note E - Business Combinations

During the first half of 2001, the Company completed its acquisitions of Embolic
Protection, Inc. (EPI), Catheter Innovations, Inc. (CI), Quanam Medical
Corporation (Quanam) and Interventional Technologies, Inc. (IVT). The cost for
these four acquisitions, excluding future contingent payments, amounted to
approximately $470 million, consisting of approximately $456 million in cash and
the issuance of 969,459 Company shares. The acquisition is intended to
strengthen and broaden the Company's product offerings in the field of
electrophysiology.

On August 9, 2001, the Company completed its acquisition of 100 percent of the
outstanding shares of Cardiac Pathways Corporation (CPC) in an all cash
transaction for approximately $115 million. CPC designs, manufactures and
markets less invasive systems used by electrophysiologists to diagnose and treat
cardiac tachyarrythmias (abnormally rapid heart rhythms). The acquisition is
intended to strengthen and broaden the Company's product offerings in the field
of electrophysiology.

As of September 30, 2001, the Company has recorded $4 million for trademarks and
$37 million for goodwill acquired in connection with the Company's acquisition
of CPC, which are not subject to amortization in accordance with Financial
Accounting Standards Board (FASB) Statement No. 142, "Goodwill and Other
Intangible Assets". The goodwill acquired in connection with CPC is not
deductible for tax purposes.

The Company's acquisitions were accounted for using the purchase method of
accounting. The condensed consolidated financial statements include the
operating results for each acquired entity from their respective date of
acquisition. Pro forma information is not presented, as the acquired companies'
results of operations prior to their date of acquisition are not material to the
Company.

determining technological feasibility of these projects is obtaining regulatory
approval. Accordingly, the value attributable to these projects, which have not
yet obtained regulatory approval, was immediately expensed at acquisition. If
the projects are not successful or completed in a timely manner, the Company may
not realize the financial benefits expected for these projects. Other intangible
assets subject to amortization recorded in connection with these acquisitions
are being amortized on a straight-line basis ranging from 9 to 25 years.

The income approach was used to establish the fair values of the purchased
research and development. This approach established the fair value of an asset
by estimating the after-tax cash flows attributable to the in-process project
over its useful life and then discounting these after-tax cash flows back to a
present value. Revenue estimates were based on estimates of relevant market
sizes, expected market growth rates, expected trends in technology and expected
product introductions by competitors. In arriving at the value of the in-process
research and development projects, the Company considered, among other factors,
the in-process project's stage of completion, the complexity of the work
completed as of the acquisition date, the costs already incurred, the projected
costs to complete, the contribution of core technologies and other acquired
assets, the expected introduction date, and the estimated useful life of the
technology. The discount rate used to arrive at a present value as of the date
of acquisition was based on the time value of money and medical technology
investment risk factors. For the purchased research and development programs,
risk-adjusted discount rates ranging from 16 percent to 28 percent were utilized
to discount the projected cash flows. The Company believes that the estimated
purchased research and development amounts so determined represent the fair
value at the date of acquisition and do not exceed the amount a third party
would pay for the projects.

The most significant projects, relative to the purchased research and
development charge recorded in connection with the acquisitions consummated in
the first nine months of 2001, are the next generation Cutting Balloon(TM)
catheter, the next generation Infiltrator(R) transluminal drug delivery catheter
and embolic protection devices which represent over 64 percent of the in-process
value. The Cutting Balloon is a novel balloon angioplasty device with mounted
scalpels that relieves stress in the artery, reducing the force necessary to
expand the vessel. This contributes to less inadvertent arterial trauma and
injury as compared to standard balloon angioplasty. The Infiltrator transluminal
drug delivery catheter is designed to directly deliver therapeutic agents into
the wall of the artery with high levels of efficiency. The embolic protection
devices are filters that are mounted on a guidewire and are used to capture
embolic material that is dislodged during cardiovascular interventions. As of
the date of acquisition, the projects were expected to be completed and the
products to be commercially available on a worldwide basis within one to four
years, with an estimated cost to complete of approximately $30 million to $45
million.

The Company is subject to contingent payments over the next four years based on
the acquired companies reaching certain performance and other milestones. These
payments, some of which may be made in the Company's stock, would be allocated
to specific intangible asset categories with the remainder assigned to excess of
cost over net assets acquired on the basis that the consideration had been paid
as of the date of acquisition.

Note F - Plant Optimization Initiative

At September 30, 2001, the Company had approximately $55 million of accrued
severance and related costs associated with the Company's 2000 plant
optimization initiative. The intent of the plant optimization initiative is to
better allocate the Company's resources by creating a more effective network of
manufacturing and research and development facilities. It will consolidate
manufacturing operations along product lines and shift significant amounts of
production to Company facilities in Miami and Ireland and to contract
manufacturing. The Company's plan includes the discontinuation of manufacturing
activities at three facilities in the U.S., and includes the planned
displacement of approximately 2,000 manufacturing, manufacturing support and
management employees. The Company expects that the plan will be substantially
completed by the first quarter of 2002. During the second quarter of 2001, the
Company recorded a pre-tax charge of $4 million primarily as a result of changes
in estimates of severance costs associated with the plant optimization
initiative. As of September 30, 2001, approximately $8 million had been charged
against the restructuring accrual for the approximately 500 employees terminated
pursuant to the plan.

Note G - Inventories

The components of inventory consist of the following:

September 30, December 31,
(In millions) 2001 2000
- --------------------------------------------------------------------------
Finished goods $154 $172
Work-in-process 72 59
Raw materials 98 123
------------------------------
$324 $354
==============================

At September 30, 2001, the Company had approximately $43 million of net NIR(R)
coronary stent inventory, which is supplied by Medinol Ltd. (Medinol), and was
committed to purchase approximately $9 million of NIR(R) stents from Medinol.
During the second quarter of 2001, the Company recorded a provision of $49
million ($34 million, net of tax) for excess NIR(R) stent inventories. The
excess provision was driven primarily by declining demand for the current NIR(R)
coronary stent technology.

Note H - Derivative Instruments and Hedging Activities

The Company hedges its net recognized foreign currency transactional exposures
with forward foreign exchange contracts to reduce the risk that the Company's
earnings and cash flows will be adversely affected by changes in foreign
currency exchange rates. These foreign exchange contracts are not designated as
cash flow, fair value or net investment hedges under Statement No. 133. These
derivative instruments do not subject the Company's earnings or cash flows to
material risk due to exchange rate movements because gains and losses on these
derivatives offset losses and gains on the assets and liabilities being hedged.
These forward foreign exchange contracts are entered into for periods consistent
with commitments, generally one to six months.

In addition, the Company hedges a portion of its forecasted inter-company and
third-party transactions with foreign exchange forward and option contracts.
These contracts are entered into

to reduce the risk that the Company's earnings and cash flows resulting from
certain forecasted transactions will be adversely affected by changes in foreign
currency exchange rates. However, the Company may be impacted by changes in
foreign currency exchange rates related to the unhedged portion. The success of
the hedging program depends, in part, on forecasts of transaction activity in
various currencies (currently the Japanese yen and the euro). The Company may
experience unanticipated foreign currency exchange gains or losses to the extent
that there are timing differences between forecasted and actual activity during
periods of currency volatility. However, since the critical terms of forward
contracts designated as cash flow hedging instruments are the same as the
underlying forecasted transaction, changes in the fair value of forward
contracts should be highly effective in offsetting the present value of changes
in the expected cash flows from the forecasted transaction. The ineffective
portion of any changes in the fair value of option contracts designated as cash
flow hedging instruments is recognized immediately in earnings. The Company did
not recognize material gains or losses resulting from either hedge
ineffectiveness or changes in forecast probability during the nine months ended
September 30, 2001.

The effective portion of any changes in the fair value of the derivative
instruments, designated as cash flow hedges, is recorded in accumulated other
comprehensive income/(loss) (AOCI), net of tax, until the third-party
transaction associated with the hedged forecasted transaction occurs. Once the
third-party transaction associated with the hedged forecasted transaction
occurs, the effective portion of any related gain or loss on the cash flow hedge
is reclassified from AOCI to earnings. In the event the hedged forecasted
intercompany or third-party transaction does not occur, or it becomes probable
that it will not occur, the effective portion of any gain or loss on the related
cash flow hedge would be reclassified from AOCI to earnings at that time.

The Company recognized a net gain of approximately $13 million and $29 million
in earnings from derivative instruments designated as cash flow hedges of
forecasted transactions during the three and nine months ended September 30,
2001, respectively. All of the derivative instruments, designated as cash flow
hedges, outstanding at September 30, 2001, mature within the subsequent 24-month
period. As of September 30, 2001, approximately $25 million of unrealized net
gains have been recorded in AOCI, net of tax, to recognize the effective portion
of any fair value of derivative instruments that are, or previously were,
designated as cash flow hedges. Based upon current exchange rates, a gain of
approximately $25 million, net of tax, may be reclassified to earnings within
the next twelve months to mitigate foreign exchange risk.

Note I - New Accounting Standards

In July 2001, the Financial Accounting Standards Board issued Statement No. 141,
"Business Combinations", and Statement No. 142, "Goodwill and Other Intangible
Assets", which are effective July 1, 2001 and January 1, 2002, respectively, for
the Company. Statement No. 141 requires that the purchase method of accounting
be used for all business combinations subsequent to June 30, 2001 and specifies
criteria for recognizing intangible assets acquired in a business combination.
Statement No. 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized upon adoption of this standard, but instead
be tested for impairment at least annually. In addition, goodwill and intangible
assets with indefinite useful lives recorded as a result of business
combinations completed during the six-month period ending December 31, 2001 will
not be amortized. Intangible assets with definite useful lives will continue to
be amortized over their respective estimated useful lives. The Company has
adopted Statement No. 141 and is in the process of determining the effect of
adoption of Statement No. 142 on its consolidated financial statements and
related disclosures.

In August and October 2001, the Financial Accounting Standards Board issued
Statement No. 143, "Accounting for Asset Retirement Obligations", and Statement
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
respectively, which are effective for fiscal years beginning after June 15, 2002
and December 15, 2001, respectively. Statement No. 143 requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred and a corresponding increase in the carrying
amount of the related long-lived asset. Subsequently, the asset retirement cost
should be allocated to expense using a systematic and rational method. Statement
No. 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. It supersedes, with exceptions, Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". The Company is in the process of determining the
effect of adoption of these statements on its consolidated financial statements
and related disclosures.

Note J - Commitments and Contingencies

On March 25, 1996, Cordis Corporation (Cordis), a subsidiary of Johnson &
Johnson Company (Johnson & Johnson), filed a suit for patent infringement
against SCIMED, a subsidiary of the Company, alleging the infringement of five
U.S. patents by SCIMED's LEAP(TM) balloon material used in certain SCIMED
catheter products, including SCIMED's BANDIT(TM) and EXPRESS PLUS(TM) catheters.
The suit was filed in the U.S. District Court for the District of Minnesota and
seeks monetary and injunctive relief. SCIMED has answered, denying the
allegations of the complaint. A trial date has not yet been set.

On March 27, 1997, SCIMED filed suit for patent infringement against Cordis,
alleging willful infringement of several SCIMED U.S. patents by Cordis'
TRACKSTAR 14(TM), TRACKSTAR 18(TM), OLYMPIX(TM), POWERGRIP(TM), SLEEK(TM),
SLEUTH(TM), THOR(TM), TITAN(TM) and VALOR(TM) catheters. The suit was filed in
the U.S. District Court for the District of Minnesota, seeking monetary and
injunctive relief. The parties have agreed to add Cordis' CHARGER(TM) and
HELIX(TM) catheters to the suit. Cordis has answered, denying the allegations of
the complaint. A trial date has not yet been set.

On March 13, 1997, the Company (through its subsidiaries) filed suits against
Johnson & Johnson (through its subsidiaries) in The Netherlands, the United
Kingdom and Belgium, and on March 17, 1997 filed suit in France, seeking a
declaration of noninfringement for the NIR(R) stent relative to two European
patents licensed to Ethicon, Inc. (Ethicon), a Johnson & Johnson subsidiary, as
well as a declaration of invalidity with respect to those patents. After a trial
on the merits in the United Kingdom during March 1998, the court ruled on June
26, 1998 that neither of the patents is infringed by the NIR(R) stent, and that
both patents are invalid. Ethicon appealed, and on March 20, 2000, the appellate
court upheld the trial outcome. On October 28, 1998, the Company's motion for a
declaration of noninfringement in France was dismissed for failure to satisfy
statutory requirements; the French invalidity suits were not affected. A hearing
related to the French invalidity suits is scheduled for November 19, 2001.

On March 20, 21 and 22, 1997, the Company (through its subsidiaries) filed
additional suits against Johnson & Johnson (through its subsidiaries) in Sweden,
Italy and Spain, respectively, seeking a declaration of noninfringement for the
NIR(R) stent relative to one of the European patents licensed to Ethicon in
Sweden, Italy and Spain and a declaration of invalidity in Italy and Spain. In
Italy, a technical expert was appointed by the court and a hearing is scheduled
for January 30, 2002. On August 21, 2001, the Company withdrew its
noninfringement action in Sweden under an agreement signed by all parties.
Ethicon and other Johnson & Johnson subsidiaries filed a cross-border suit in
The Netherlands on March 17, 1997, alleging that the NIR(R) stent infringes one
of the European patents licensed to Ethicon. In this action, the Johnson &
Johnson entities requested relief, including provisional relief (a preliminary
injunction), covering Austria, Belgium, France, Greece, Italy, The Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom. On April 2, 1997, the
Johnson & Johnson entities filed a similar cross-border proceeding in The
Netherlands with respect to a second European patent licensed to Ethicon.
Johnson & Johnson subsequently withdrew its request for cross-border relief in
the United Kingdom. In October, 1997, Johnson & Johnson's request for
provisional cross-border relief on both patents was denied by the Dutch court,
on the ground that it is "very likely" that the NIR(R) stent will be found not
to infringe the patents. Johnson & Johnson appealed this decision with respect
to the second patent; the appeal has been denied on the ground that there is a
"ready chance" that the patent will be declared null and void. In January 1999,
Johnson & Johnson amended the claims of the second patent, changed the action
from a cross-border case to a Dutch national action, and indicated its intent
not to pursue its action on the first patent. On June 23, 1999, the Dutch Court
affirmed that there were no remaining infringement claims with respect to either
patent. In late 1999, Johnson & Johnson appealed this decision. A hearing on the
appeal has not yet been scheduled.

On May 6, 1997, Ethicon Endosurgery, Inc. sued the Company in Dusseldorf,
Germany, alleging that the Company's NIR(R) stent infringes one of Ethicon's
patents. On June 23, 1998, the case was stayed following a decision in an
unrelated nullity action in which the Ethicon patent was found to be invalid.

On August 22, 1997, Johnson & Johnson filed a suit for patent infringement
against the Company alleging that the sale of the NIR(R) stent infringes certain
Canadian patents owned by Johnson & Johnson. Suit was filed in the federal court
of Canada seeking a declaration of infringement, monetary damages and injunctive
relief. The Company has answered, denying the allegations of the complaint. A
trial is expected to begin in late 2003.

On October 22, 1997, Cordis filed a suit for patent infringement against the
Company and SCIMED alleging that the importation and use of the NIR(R) stent
infringes two patents owned by Cordis. On April 13, 1998, Cordis filed a suit
for patent infringement against the Company and SCIMED alleging that the
Company's NIR(R) stent infringes two patents owned by Cordis. The suits were
filed in the U.S. District Court for the District of Delaware seeking monetary
damages, injunctive relief and that the patents be adjudged valid, enforceable
and infringed. A trial on both actions was held in late November through early
December 2000. A jury found that the NIR(R) stent does not infringe three Cordis
patents, but does infringe one claim of one Cordis patent and awarded damages of
approximately $324 million to Cordis. A post-trial hearing was held July 26,
2001. Judgment has not yet been entered by the Court.

On June 7, 1999, the Company, SCIMED and Medinol filed suit for patent
infringement against Johnson & Johnson, Johnson & Johnson Interventional Systems
and Cordis, alleging two U.S.

patents owned by Medinol and exclusively licensed to the Company are infringed
by Cordis' Crown(TM), MINICrown(TM) and CORINTHIAN(TM) stents. The suit was
filed in the U.S. District Court for the District of Minnesota seeking
injunctive and monetary relief. On April 14, 2000, the Company (through its
subsidiaries) and Medinol filed suit for patent infringement against Johnson &
Johnson, Cordis, and a subsidiary of Cordis alleging that a patent owned by
Medinol and exclusively licensed to the Company is infringed by Cordis' BX
Velocity(TM) stent delivery system. The complaint was filed in the U.S. District
Court for the District of Delaware seeking monetary and injunctive relief. The
Minnesota action was transferred to the U.S. District Court for the District of
Delaware and consolidated with the Delaware action filed by the Company. A trial
was held in August 2001 on both actions. On September 7, 2001, a jury found that
Cordis' BX Velocity, Crown, and MINICrown stents do not infringe the patents,
and that the asserted claims of those patents are invalid. The jury also found
that Cordis' CORINTHIAN stent infringes a valid Medinol patent claim and awarded
the Company and Medinol $8.3 million in damages. Post-trial briefing motions are
scheduled through December 2001.

On March 24, 2000, the Company (through its subsidiaries) and Medinol filed a
cross-border suit against Johnson & Johnson, Cordis and certain of their foreign
subsidiaries in The Netherlands alleging Cordis' BX Velocity(TM) stent delivery
system infringes one of Medinol's European patents. In this action, the Company
and Medinol requested monetary and injunctive relief covering The Netherlands,
Austria, Belgium, Switzerland, Germany, Denmark, Spain, France, Greece, Ireland,
Italy, Liechtenstein, Luxembourg, Monaco, Portugal and Sweden. A hearing was
held January 12, 2001. On March 19, 2001, the Company's request for preliminary
injunction was denied by the Court. On May 11, 2001, the Company appealed this
decision. A hearing on the appeal has not yet been scheduled.

On March 30, 2000, the Company (through its subsidiary) filed suit for patent
infringement against two subsidiaries of Cordis alleging that Cordis' BX
Velocity stent delivery system infringes a published utility model owned by
Medinol and exclusively licensed to the Company. The complaint was filed in the
District Court of Dusseldorf, Germany seeking monetary and injunctive relief. A
hearing was held on March 15, 2001 and on June 6, 2001, the Court issued a
written decision that Cordis' BX Velocity stent delivery system infringes the
Medinol published utility model. Cordis appealed the decision of the German
court. A hearing on the appeal has not yet been scheduled.

On August 13, 1998, Arterial Vascular Engineering, Inc., now named Medtronic AVE
Inc. (Medtronic AVE), filed a suit for patent infringement against the Company
and SCIMED alleging that the Company's NIR(R) stent infringes two patents owned
by Medtronic AVE. The suit was filed in the U.S. District Court for the District
of Delaware seeking injunctive and monetary relief. On May 25, 2000, Medtronic
AVE amended the complaint to include a third patent. The Company and SCIMED have
answered, denying the allegations of the complaint. The parties have filed a
stipulation requesting the Court stay the case until the third quarter of 2002.

On March 10, 1999, the Company (through its subsidiary Schneider (Europe) AG)
filed suit against Medtronic AVE alleging that Medtronic AVE's AVE GFX, AVE
GFX2, AVE LTX, CALYPSO RELY(TM), PRONTO SAMBA(TM) and SAMBA RELY(TM)
rapid-exchange catheters and stent delivery systems infringe one of the
Company's German patents. The suit was filed in the District Court of
Dusseldorf, Germany seeking injunctive and monetary relief. A hearing was held
on January 27, 2000. The Court has delayed its decision pending expert advice
and on May 15, 2000, the Court

appointed a technical expert. The expert's report was submitted to the court on
November 6, 2001. A hearing is scheduled for May 2, 2002.

On April 6, 1999, Medtronic AVE filed suit against SCIMED and another subsidiary
of the Company alleging that the Company's NIR(R) stent infringes one of
Medtronic AVE's European patents. The suit was filed in the District Court of
Dusseldorf, Germany seeking injunctive and monetary relief. A hearing was held
in Germany on September 23, 1999, and on November 4, 1999, the court dismissed
the complaint. On December 21, 1999, Medtronic AVE appealed the dismissal. The
appeal is stayed pending the outcome of a related nullity action.

On July 7, 1999, Medtronic filed suit against the Company and SCIMED, alleging
that SCIMED's RADIUS(TM) stent infringes two patents owned by Medtronic. The
suit was filed in the U.S. District Court for the Fourth District Court of
Minnesota seeking injunctive and monetary relief. The Company has answered,
denying allegations of the complaint. A trial date has not been set.

On March 28, 2000, the Company and certain subsidiaries filed suit for patent
infringement against Medtronic AVE alleging that Medtronic AVE's S670(TM) rapid
exchange coronary stent system infringes a patent exclusively licensed to the
Company. The suit was filed in the U.S. District Court for the Northern District
of California seeking monetary and injunctive relief. In July 2000, this matter
was sent to arbitration. An arbitration hearing was held in April 2001 to
determine whether Medtronic AVE's S670 and S660(TM) rapid exchange coronary
stent delivery systems and the R1 rapid exchange catheter are licensed pursuant
to the terms of a settlement agreement. On July 18, 2001, the arbitration panel
determined that the accused Medtronic AVE products sold in the United States
willfully infringe the patent exclusively licensed to the Company. The Company
was awarded $169 million in damages, as well as costs and attorneys' fees, and a
permanent injunction against Medtronic AVE's sales of its S670, S660 and BeStent
2(TM) stent delivery systems and R1S rapid exchange catheter. On September 18,
2001, the U.S. District Court for the Northern District of California confirmed
the arbitration decision. On October 17, 2001, Medtronic appealed the
confirmation of the award.

On March 7, 1996, Cook Inc. (Cook) filed suit in the Regional Court, Munich
Division for Patent Disputes, in Munich, Germany against MinTec, Inc. Minimally
Invasive Technologies, alleging that the Cragg EndoPro(TM) System I and
Stentor(TM) endovascular device infringe a certain Cook patent. Following the
purchase of the assets of the Endotech/MinTec companies by the Company, the
Company assumed control of the litigation. A final hearing was held on May 12,
1999, and the court held no infringement of the Cook patents. The case was
dismissed in June 1999. Cook has appealed the decision. A hearing was held on
May 4, 2000. On July 27, 2000, the Court stayed the action pending the outcome
of a nullity action filed by the Company against the patent.

On June 30, 1998, Cook filed suit in the Regional Court, Dusseldorf Division for
Patent Disputes, in Dusseldorf, Germany against the Company alleging that the
Company's PASSAGER(TM) peripheral vascular stent graft and VANGUARD(TM)
endovascular aortic graft products infringe the same Cook patent. A hearing was
held on July 22, 1999 and a decision was received in September 1999 finding that
the Company's products infringe the Cook patent. The Company appealed the
decision. A hearing originally scheduled for August 2001 has been postponed
pending the outcome of a nullity action filed by the Company against the patent.

On March 18, 1999, Cook filed suit against the Company and SCIMED, alleging that
SCIMED's RADIUS(TM) coronary stent infringes a certain U.S. patent owned by
Cook. The suit was filed in

the U.S. District Court for the Southern District of Indiana seeking monetary
damages and injunctive relief. On July 14, 1999, Cook filed an amended complaint
adding Meadox Medicals, Inc. (Meadox), a wholly owned subsidiary of the Company,
as a party to the suit, and adding a breach of contract claim. The Company,
SCIMED and Meadox have answered, denying the allegations of the complaint. A
trial is expected in June 2002.

On May 19, 2000, the Company and SCIMED filed suit against a subsidiary of Cook
alleging that Cook's MBL-4(TM), MBL-6(TM), MBL-4-XL(TM) and MBL-6-OV(TM)
ligating devices infringe three of the Company's patents. The suit was filed in
the U.S. District Court for the District of Massachusetts seeking monetary
damages and injunctive relief. Cook counterclaimed seeking declaratory judgment
that the Company's patents are invalid and unenforceable and Cook's products do
not infringe the Company's patents. The Company filed a motion requesting a
preliminary injunction which was denied in September 2000. On May 19, 2001, the
Company and Cook entered into an agreement to settle the litigation. Pursuant to
the terms of the agreement, both parties cross-licensed patents relating to
certain technologies.

On May 23, 2001, Cook filed suit against the Company alleging that the Company's
VortX(R) embolization coils infringe a patent owned by Cook. The suit was filed
in the U.S. District Court for the Southern District of Indiana seeking monetary
damages and injunctive relief. On July 27, 2001, the Company answered and
countersued Cook alleging that certain Cook products infringe a patent owned by
the Company. On November 14, 2001, the Company amended its complaint against
Cook to include two additional patents exclusively licensed to the Company.

On September 10, 2001, the Company delivered a Notice of Dispute to Cook
Inc.(Cook) asserting that Cook breached the terms of a certain License Agreement
among Angiotech Pharmaceuticals, Inc., Cook and the Company (the "Agreement").
On October 10, 2001, pursuant to the terms of the Agreement, the Company filed a
demand for arbitration with the American Arbitration Association. On October 11,
2001, Guidant and its subsidiary, Advanced Cardiovascular Systems, Inc. (ACS),
and Cook filed suit against the Company relating to the Agreement. The suit was
filed in the United States District Court for the Southern District of Indiana
and seeks declaratory and injunctive relief. The Company will answer the
complaint and continue to assert its rights under the Agreement.

On October 31, 2000, the Federal Trade Commission (FTC) filed suit against the
Company for alleged violations of a Consent Order dated May 5, 1995, pursuant to
which the Company had licensed certain intravascular ultrasound technology to
Hewlett-Packard Company (HP). The suit was filed in the U.S. District Court for
the District of Massachusetts seeking civil penalties and injunctive relief. The
Company filed a motion to dismiss the complaint and the FTC filed a motion for
summary judgment. On October 5, 2001, the Court dismissed three of the five
claims against the Company and granted summary judgment of liability in favor of
the FTC on the two remaining claims. A hearing on damages has not yet been
scheduled.

Beginning November 4, 1998, a number of shareholders of the Company, on behalf
of themselves and all others similarly situated, filed purported stockholders'
class action suits in the U.S. District Court for the District of Massachusetts
alleging that the Company and certain of its officers violated certain sections
of the Securities Exchange Act of 1934. The complaints principally alleged that
as a result of certain accounting irregularities involving the improper
recognition of revenue by the Company's subsidiary in Japan, the Company's
previously issued financial statements were materially false and misleading. In
August 1999, lead plaintiffs and lead counsel filed a purported consolidated
class action complaint adding allegations that the Company issued false and
misleading statements with respect to the launch of its NIR ON(R) Ranger(TM)
with

Sox(TM) coronary stent delivery system and the system's subsequent recall.
Following a hearing on a motion by the Company and its officers, the court
dismissed the case without prejudice on August 16, 2001.

On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of the
Company's Schneider Worldwide subsidiaries and Pfizer Inc. ("Pfizer") and
certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr.
Bonzel amounts owed under a license agreement involving Dr. Bonzel's patented
Rapid Exchange technology. The suit was filed in the District Court for the
State of Minnesota seeking monetary relief. On September 26, 2001, Dr. Bonzel
and the Company reached a contingent settlement involving all but one claim
asserted in the complaint.

On April 5, 2001, Medinol filed a complaint against the Company and certain of
its current and former employees alleging breaches of contract, fraud and other
claims. Medinol supplies NIR(R) stents exclusively to the Company. The suit was
filed in the U.S. District Court for the Southern District of New York seeking
monetary and injunctive relief. On April 26, 2001, Medinol amended its complaint
to add claims alleging misappropriation of trade secrets in relation to the
Company's Express(TM) stent development program. Medinol seeks monetary and
injunctive relief, as well as an end to the Company's right to distribute
Medinol stents and access to certain Company intellectual property. On April 30,
2001, the Company answered and countersued Medinol and its principals, charging
them with fraud, multiple breaches of contract, unfair and deceptive practices
and defamation. The Company seeks monetary and injunctive relief. On June 11,
2001, the Company filed suit in the Jerusalem District Court in Israel against
Medinol and its controlling shareholders, alleging among other things, loss of
faith among Medinol's shareholders, breach of duty by Medinol management and
misappropriation of corporate opportunities, including trade secrets and
intellectual property. The suit seeks, among other things, monetary relief and
costs.

The Company is aware that the U.S. Department of Justice is conducting an
investigation of matters that include the Company's NIR ON(R) Ranger(TM) with
Sox(TM) coronary stent delivery system which was voluntarily recalled by the
Company in October 1998 following reports of balloon leaks. The Company is
cooperating fully in the investigation.

The Company is involved in various other lawsuits from time to time. In
management's opinion, the Company is not currently involved in any legal
proceedings other than those specifically identified above which, individually
or in the aggregate, could have a material effect on the financial condition,
operations or cash flows of the Company. As of September 30, 2001, the potential
exposure for litigation-related accruable costs is estimated to range from $7
million to $10 million. As of September 30, 2001, the range of loss for
reasonably possible contingencies that can be estimated is $0 to $404 million,
plus interest, and additional damages for sales occurring after the jury verdict
related to the Cordis suit for patent infringement filed on October 22, 1997.

The Company believes that it has meritorious defenses against claims that it has
infringed patents of others. However, there can be no assurance that the Company
will prevail in any particular case. An adverse outcome in one or more cases in
which the Company's products are accused of patent infringement could have a
material adverse effect on the Company. Further, product liability claims may be
asserted in the future relative to events not known to management at the present
time. The Company has insurance coverage which management believes is adequate
to protect against product liability losses as could otherwise materially affect
the Company's financial position.

Note K - Segment Reporting

Boston Scientific is a worldwide developer, manufacturer and marketer of medical
devices for less invasive procedures. The Company has four reportable operating
segments based on geographic regions: the United States, Europe, Japan and
Inter-Continental. Each of the Company's reportable segments generates revenues
from the sale of minimally invasive medical devices. The reportable segments
represent an aggregate of operating divisions.

Sales and operating results of reportable segments are based on internally
derived standard foreign exchange rates, which may differ from year to year and
do not include inter-segment profits. The segment information presented for 2000
has been restated based on the Company's standard foreign exchange rates used
for 2001. Because of the interdependence of the reportable segments, the
operating profit as presented may not be representative of the geographic
distribution that would occur if the segments were not interdependent.

- ------------------------------------------------------------------------------------------------------------------
Inter-
(In millions) United States Europe Japan Continental Total
- ------------------------------------------------------------------------------------------------------------------

Three months ended September 30, 2001
Net sales $402 $85 $148 $52 $687
Operating income excluding special charges 136 24 93 7 260

Three months ended September 30, 2000
Net sales $394 $82 $131 $41 $648
Operating income excluding special charges 165 20 79 2 266

Nine months ended September 30, 2001
Net sales $1,196 $271 $432 $144 $2,043
Operating income excluding special charges 424 76 264 13 777

Nine months ended September 30, 2000
Net sales $1,199 $266 $407 $127 $1,999
Operating income excluding special charges 506 75 260 8 849
- ------------------------------------------------------------------------------------------------------------------

A reconciliation of the totals reported for the reportable segments to the
applicable line items in the consolidated financial statements is as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
- -------------------------------------------------------------------------------------------------------
( In millions) 2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------

Net sales:
Total net sales for reportable segments $ 687 $ 648 $ 2,043 $ 1,999
Foreign exchange (17) 4 (47) 27
--------------------------------------------
$ 670 $ 652 $ 1,996 $ 2,026
============================================

Income (loss) before income taxes:
Total operating income for reportable segments
excluding special charges $ 260 $ 266 $ 777 $ 849
Manufacturing operations (24) (19) (72) (71)
Corporate expenses and foreign exchange (124) (92) (432) (272)
Purchased research and development (10) (277)
Restructuring and merger related charges (23) (4) (23)
--------------------------------------------
102 132 (8) 483
Other expense, net (15) (13) (44) (38)
--------------------------------------------
$ 87 $ 119 $ (52) $ 445
============================================

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Net sales for the third quarter of 2001 were $670 million as compared to $652
million in the third quarter of 2000, an increase of 3 percent. Net sales for
the third quarter of 2001 were adversely impacted by approximately $22 million
due to foreign currency fluctuations compared to the third quarter of 2000. The
reported net income for the third quarter of 2001 was $58 million, or $0.14 per
share (diluted), as compared to net income of $85 million, or $0.21 per share,
in the third quarter of 2000. The results for the third quarter of 2001 include
purchased research and development ($10 million) primarily related to the
acquisition of Cardiac Pathways (CPC), and costs associated with the Company's
global operations plan ($14 million). The results for the third quarter of 2000
include a provision for excess NIR(R) stent inventory ($5 million), and costs
associated with the Company's global operations plan ($26 million).

Net sales for the nine months ended September 30, 2001 were $1,996 million as
compared to $2,026 million for the nine months ended September 30, 2000, a
decline of 1 percent. Net sales for the nine months ended September 30, 2001
were adversely impacted by approximately $75 million due to foreign currency
fluctuations compared to the nine months ended September 30, 2000. The reported
net loss for the nine months ended September 30, 2001 was $119 million, or $0.30
per share, as compared to net income of $313 million, or $0.76 per share
(diluted), for the nine months ended September 30, 2000. The results for the
nine months ended September 30, 2001 include a provision for purchased research
and development ($277 million); a write-down of intangible assets ($24 million)
related to research and development programs discontinued in the second quarter
of 2001; a provision for excess inventories ($49 million) due to declining
demand for the current NIR(R) coronary stent technology; and costs associated
with the Company's global operations plan ($46 million). The results for the
nine months ended September 30, 2000 include a provision for excess NIR(R) stent
inventory ($5 million), and costs associated with the Company's global
operations plan ($26 million).

During the third quarter of 2001, United States (U.S.) revenues increased
approximately 2 percent to $403 million, while international revenues increased
approximately 4 percent to $267 million. The increases were due to revenue
growth in the Company's product lines excluding coronary stents and to revenue
generated by businesses acquired in 2001. The increases in revenue were
partially offset by the effects of foreign currency fluctuations and decreases
in the Company's sales of coronary stents. Worldwide coronary stent revenues
were approximately $79 million during the third quarter of 2001, compared to
$106 million during the third quarter of 2000.

U.S. revenues remained approximately flat at $1,197 million, while international
revenues decreased approximately 3 percent to $799 million during the nine
months ended September 30, 2001 compared to the same period in the prior year.
Revenues for the period were negatively impacted by the effects of foreign
currency fluctuations and decreases in the Company's sales of coronary stents.
Worldwide coronary stent revenues were approximately $271 million during the
nine months ended September 30, 2001, compared to $342 million during the same
period in the prior year. These reductions were partially offset by revenue
growth in the Company's other product lines and by revenue generated from
businesses acquired in 2001.

The worldwide coronary stent market is dynamic and highly competitive, with
significant market share volatility. In addition, technology and competitive
offerings in the market are constantly changing. Stent revenues will continue to
be negatively impacted by the volatility in the worldwide coronary stent market
and by competitive offerings. The Company anticipates that its global NIR(R)
coronary stent market share will continue to decline during the fourth quarter
of 2001 as physician acceptance of the current NIR(R) coronary stent platform
continues to erode. During the quarter, the Company launched its EXPRESS(TM)
coronary stent in European and Inter-Continental markets and anticipates
launching the EXPRESS coronary stent in the U.S. during the second half of 2002.
Additionally, during the quarter, the Company reported impressive clinical
results for its paclitaxel-eluting stent. The Company expects to launch a
paclitaxel-eluting stent in Europe during 2002 and in the U.S. during 2003. The
timing of submission for and receipt of regulatory approvals to market next
generation coronary and peripheral stent platforms in the U.S. and international
markets will influence the Company's ability to offer competitive stent
products.

Gross profit as a percentage of net sales decreased to 68.1 percent in the third
quarter of 2001 from 69.3 percent in the third quarter of 2000, and decreased to
64.7% for the nine months ended September 30, 2001 from 68.9 percent for the
same period in the prior year. The decrease in gross margin during the third
quarter of 2001 is primarily due to $14 million of expenses ($10 million, net of
tax) associated with the Company's global operations plan. During the third
quarter of 2000, the Company recorded cost of sales of $3 million ($2 million,
net of tax) related to its global operation plan and $5 million ($3 million ,
net of tax) to provide for excess NIR(R) stent inventory. The decrease in gross
margin during the nine months ended September 30, 2001 is primarily due to a
provision recorded in the second quarter of 2001 of $49 million ($34 million,
net of tax) for excess NIR(R) stent inventory. The excess position was driven
primarily by declining demand for the current NIR(R) coronary stent technology.
Gross margin for the nine months ended September 30, 2001 was also negatively
impacted by $42 million ($28 million, net of tax) of expenses associated with
the Company's global operations plan. These reductions to gross margin were
partially offset by operational cost improvements and the Company's hedging
activities. The Company's ability to effectively manage its mix and levels of
inventory, including consignment inventory, as the Company transitions to new
products will be critical in minimizing excess inventories.

Medinol Ltd. (Medinol), an Israeli company, is the supplier of the NIR(R)
coronary stent. Generally, the Company has less control over inventory
manufactured by third parties as compared to inventory manufactured internally.
Furthermore, the purchase price of NIR(R) coronary stents, the amount of NIR(R)
coronary stent sales as a percentage of the Company's worldwide sales and the
mix of coronary stent platforms could significantly impact gross margins. At
September 30, 2001, the Company had approximately $43 million of net NIR(R)
coronary stent inventory and was committed to purchase approximately $9 million
of NIR(R) stents from Medinol. Worldwide NIR(R) coronary stent sales as a
percentage of the Company's worldwide sales were approximately 10 percent and 15
percent during the third quarter of 2001 and 2000, respectively, and were
approximately 13 percent and 16 percent during the nine months ended September
30, 2001 and 2000, respectively.

On April 5, 2001, Medinol filed a lawsuit against the Company and a number of
its current and former employees, alleging fraud, breaches of contract, and
other claims. On April 26, 2001, Medinol amended its complaint to add claims
alleging misappropriation of trade secrets. In the suit, Medinol is seeking,
among other things, to end the Company's right to distribute Medinol stents and
to access certain Company intellectual property. On April 30, 2001, the Company
answered and countersued Medinol and its principals charging them with fraud,
multiple breaches of contract, unfair and deceptive practices and defamation. On
June 11, 2001, the Company filed suit in the Jerusalem District Court in Israel
against Medinol and its controlling shareholders, alleging among other things,
loss of faith among Medinol's shareholders, breach of duty by Medinol management
and misappropriation of corporate opportunities, including trade secrets and
intellectual property. The suit seeks, among other things, injunctive relief and
costs. The Company's ability to manage its relationship with Medinol during the
pendency of the litigation and the outcome of the litigation with Medinol could
impact the future operating results of the Company.

During 2000, the Company approved and committed to a global operations plan
consisting of a series of strategic initiatives designed to increase
productivity and enhance innovation. The plan includes manufacturing process and
supply chain programs and a plant optimization initiative. The manufacturing
process and supply chain programs are designed to lower inventory levels and the
cost of manufacturing and to minimize inventory write-downs. Gross margin
benefits will not be fully realized until improvements of manufacturing
processes are completed and historical inventories are sold.

The intent of the plant optimization initiative is to better allocate the
Company's resources by creating a more effective network of manufacturing and
research and development facilities. It will consolidate manufacturing
operations along product lines and shift significant amounts of production to
Company facilities in Miami and Ireland and to contract manufacturing. The
Company's plan includes the discontinuation of manufacturing activities at three
facilities in the U.S., and includes the planned displacement of approximately
2,000 manufacturing, manufacturing support and management employees. As of
September 30, 2001, approximately $8 million had been charged against the
restructuring accrual for the approximately 500 employees terminated pursuant to
the plan. The Company expects that the plan will be substantially completed
during the first quarter of 2002. The extension in the Company's estimated
timing for completion of the plan results primarily from delays in the shift of
certain product lines to the Company's facility in Miami. The Company does not
expect this extension to significantly impact the costs of the plan or the
anticipating savings resulting from the plan. During the nine months ended
September 30, 2001, the Company recorded pre-tax expenses of $42 million ($28
million, net of tax) as cost of sales related to transition costs associated
with the plant optimization plan and accelerated depreciation on fixed assets
whose useful lives have been reduced as a result of the initiative. The Company
also recorded a pre-tax charge of $4 million during the second quarter of 2001
primarily as a result of changes in estimates of severance costs associated with
the plant optimization initiative. The Company estimates that it will record
pre-tax expenses of approximately $20 million as cost of sales over the
remainder of the plant optimization initiative, primarily for transition costs,
accelerated depreciation and abnormal production variances related to
underutilized plant capacity.

The Company estimates that the global operations plan will achieve pre-tax
operating savings, relative to the base year of 1999, of approximately $100
million in 2001, $220 million in 2002 and $250 million in annualized savings
thereafter. Incremental pre-tax savings expected to be realized in 2001 relative
to 2000 are estimated to be approximately $30 million. These savings will be
realized primarily as reduced cost of sales and are expected to help mitigate
gross margin pressures that have resulted from the launch of higher costing
stents and stent delivery systems in 2001. Additionally, the Company intends to
continue to use a portion of these savings to fund its increased investment in
research and development.

Selling, general and administrative expenses as a percentage of sales increased
to 35 percent of sales in the third quarter of 2001 from 33 percent in the third
quarter of 2000 and increased approximately $16 million to $232 million.
Selling, general and administrative expenses as a percentage of sales increased
to 34 percent of sales for the nine months ended September 30, 2001 from 32
percent during the nine months ended September 30, 2000 and increased
approximately $43 million to $687 million. The increase is primarily
attributable to costs associated with the businesses acquired in 2001 and
incremental costs incurred to strengthen and retain the Company's field sales
force.

Amortization expense increased to $30 million in the third quarter of 2001 from
$23 million in the third quarter of 2000 and was approximately 4 percent of
sales during the third quarter of 2001 and 2000. Amortization expense increased
to $105 million during the nine months ended September 30, 2001 from $69 million
during the nine months ended September 30, 2000 and increased as a percentage of
sales to 5 percent from 3 percent. The increase in expense dollars for the third
quarter is attributable to the amortization of intangible assets related to
businesses acquired during the first three quarters of 2001. The increase for
the nine months ended September 30, 2001 is a result of a $24 million ($17
million, net of tax) write-down of intangible assets primarily related to
research and development programs discontinued in the second quarter of 2001 and
amortization of intangible assets related to businesses acquired in 2001.

Royalties were approximately $10 million in the third quarter of 2001 and 2000
and decreased to $28 million during the nine months ended September 30, 2001
from $31 million during the nine months ended September 30, 2000. The decrease
is primarily due to a reduction in sales of royalty bearing products. The
Company continues to enter into strategic technological alliances, some of which
include royalty commitments.

Research and development expenses were approximately $72 million and 11 percent
of net sales during the third quarter of 2001, and approximately $48 million and
7 percent of net sales during the third quarter of 2000. Research and
development expenses were approximately $199 million and 10 percent of net sales
during the nine months ended September 30, 2001, and approximately $146 million
and 7 percent of net sales during the nine months ended September 30, 2000. The
increase in research and development is primarily due to increased funding for
the development of, and the clinical trials related to, new products, including
the Company's internally developed stent platform, its drug-eluting stent
program, its carotid program and programs acquired in connection with the
Company's business combinations consummated in the first three quarters of 2001.
The investment in research and development dollars reflects spending on new
product development programs as well as regulatory compliance and clinical
research. The Company continues to be committed to refining existing products
and procedures and to developing new technologies that can reduce risk, trauma,
cost, procedure time and the need for aftercare.

On November 8, 2001, the Company announced the signing of a definitive agreement
to acquire RadioTherapeutics Corporation (RTC). RTC develops and manufactures
proprietary radiofrequency-based therapeutic devices in the field of
interventional oncology for the ablation (destruction) of various forms of soft
tissue lesions (tumors). The transaction is expected to close in December 2001.

The Company's acquisitions were accounted for using the purchase method of
accounting. The condensed consolidated financial statements include the
operating results for each acquired entity from its respective date of
acquisition. Pro forma information is not presented, as the acquired companies'
results of operations prior to their dates of acquisition are not material to
the Company.

The aggregate purchase price for each acquisition has been allocated to the
assets acquired and liabilities assumed based on their fair values at date of
acquisition. The estimated excess of purchase price over the fair value of the
net tangible assets acquired was allocated to identifiable intangible assets, as
valued by an independent appraiser using information and assumptions provided by
management. Based upon these valuations, the Company recorded charges of $277
million to account for purchased research and development related to businesses
acquired during the nine months ended September 30, 2001. The valuation of
purchased research and development, for which management is primarily
responsible, represents the estimated fair value at the date of acquisition
related to in-process projects. As of the date of acquisition, the in-process
projects had not yet reached technological feasibility and had no alternative
future uses. The primary basis for determining technological feasibility of
these projects is obtaining regulatory approval. Accordingly, the value
attributable to these projects, which have not yet obtained regulatory approval,
was immediately expensed at acquisition. If the projects are not successful or
completed in a timely manner, the Company may not realize the financial benefits
expected for these projects. Other intangible assets subject to amortization
recorded in connection with these acquisitions are being amortized on a
straight-line basis ranging from 9 to 25 years.

The most significant projects, relative to the purchased research and
development charge recorded in connection with the acquisitions consummated in
the first nine months of 2001, are the next generation Cutting Balloon(TM)
catheter the next generation Infiltrator(R) transluminal drug delivery catheter
and embolic protection devices, which represent over 64 percent of the
in-process value. The Cutting Balloon is a novel balloon angioplasty device with
mounted scalpels that relieves stress in the artery, reducing the force
necessary to expand the vessel. This contributes to less inadvertent arterial
trauma and injury as compared to standard balloon angioplasty. The Infiltrator
transluminal drug delivery catheter is designed to directly deliver therapeutic
agents into the wall of the artery with high levels of efficiency. The embolic
protection devices are filters that are mounted on guidewires and are used to
capture embolic material that is dislodged during cardiovascular interventions.
As of the date of acquisition, the projects were expected to be completed and
the products to be commercially available on a worldwide basis within one to
four years, with an estimated cost to complete of approximately $30 million to
$45 million.

The Company is subject to contingent payments over the next four years based on
the acquired companies' reaching certain performance and other milestones. These
payments, some of which may be made in the Company's stock, would be allocated
to specific intangible asset categories with the remainder assigned to excess of
cost over net assets acquired on the basis that the consideration had been paid
as of the date of acquisition.

Interest expense was $16 million in the third quarter of 2001 and 2000 and
decreased to $46 million during the nine months ended September 30, 2001 from
$56 million during the nine months ended September 30, 2000. The decrease in
interest expense for the nine months ended September 30, 2001 is primarily
attributable to lower average debt balances over the period and lower average
interest rates.

Other income, net, compared to the third quarter of 2000 remained relatively
flat in the third quarter of 2001 and decreased to $2 million during the nine
months ended September 30, 2001 from $18 million during the nine months ended
September 30, 2000. The change for the nine months ended September 30, 2001 is
primarily due to net gains recognized on sales of available-for-sale securities
of approximately $14 million recorded during the first three quarters of 2000.

The Company's effective tax rate, excluding the impact of purchased research and
development, was approximately 30 percent during the nine months ended September
30, 2001 and 2000.

Uncertainty remains with regard to future changes within the health care
industry. The trend toward managed care and economically motivated and more
sophisticated buyers in the U.S. may result in continued pressure on selling
prices of certain products and resulting compression on gross margins. In
addition to impacting selling prices, the trend to managed care in the U.S. has
also resulted in more complex billing and collection procedures. The Company's
ability to react effectively to the changing environment may impact its bad debt
and sales allowances in the future. Further, the U.S. marketplace is
increasingly characterized by consolidation among health care providers and
purchasers of medical devices that prefer to limit the number of suppliers from
which they purchase medical products. There can be no assurance that these
entities will continue to purchase products from the Company.

International markets are also being affected by economic pressure to contain
reimbursement levels and health care costs. The Company's profitability from its
international operations may be limited by risks and uncertainties related to
economic conditions in these regions, regulatory and reimbursement approvals,
competitive offerings, infrastructure development, rights to intellectual
property and the ability of the Company to implement its overall business
strategy. Any significant changes in the competitive, political, regulatory,
reimbursement or economic environment where the Company conducts international
operations may have a material impact on revenues and profits, especially in
Japan, given its high profitability relative to its contribution to revenues.
Deterioration in the Japanese and/or emerging markets economies may impact the
Company's ability to grow its business and to collect its accounts receivable.
Additionally, the trend in countries around the world toward more stringent
regulatory requirements for product clearance and more vigorous enforcement
activities has generally caused or may cause medical device manufacturers to
experience more uncertainty, greater risk and higher expenses. These factors may
impact the rate at which the Company can grow.

In addition, the impact of selling higher costing stents, the cost of
maintaining the Company's sales force and increases its investment in research
and development are expected to result in lower operating margins throughout
2001 as compared to 2000. However, management believes that it is positioning
the Company to take advantage of opportunities that exist in the markets it
serves.

LIQUIDITY AND CAPITAL RESOURCES

Cash and short-term investments totaled $99 million at September 30, 2001,
compared to $60 million at December 31, 2000. Working capital decreased to $86
million at September 30, 2001, compared to $173 million at December 31, 2000.
The change in working capital is primarily due to short-term borrowings to fund
the Company's strategic acquisitions. Cash proceeds during the nine months ended
September 30, 2001 were primarily generated from operating activities and
through the Company's borrowings. Cash proceeds were primarily used to fund
acquisitions and other strategic alliances and capital expenditures during the
period.

At September 30, 2001, the Company had $550 million in credit facility
borrowings outstanding at a weighted-average interest rate of 2.98 percent
compared to approximately $187 million of credit facility borrowings outstanding
at a weighted-average interest rate of 4.54 percent at December 31, 2000. At
September 30, 2001, the Company had $74 million in commercial paper outstanding
at a weighted-average interest rate of 3.73 percent, compared to $56 million of
commercial paper outstanding at a weighted-average interest rate of 8.00 percent
at December 31, 2000. The Company intends to continue to borrow under its credit
facilities until it is able to issue sufficient commercial paper at reasonable
rates.

The Company has the ability to refinance a portion of its short-term debt on a
long-term basis through its revolving credit facilities. The Company expects a
minimum of $289 million to remain outstanding beyond the next twelve months,
and, accordingly, has reclassified this portion of borrowings as long-term at
September 30, 2001, compared to no such reclassification at December 31, 2000.

The Company has recognized net deferred tax assets aggregating $168 million at
September 30, 2001, and $226 million at December 31, 2000. The assets relate
principally to the establishment of inventory and product-related reserves and
purchased research and development. In light of the Company's historical
financial performance, the Company believes that these assets will be
substantially recovered.

The Company expects that it will make total cash outlays, net of proceeds from
building and fixed asset sales, of approximately $120 million for the plant
optimization initiative. As of September 30, 2001, the Company has made cash
outlays of $70 million for the plan, and expects to make additional payments of
approximately $25 million during the remainder of 2001.

The Company anticipates that these cash outlays will be funded from cash flows
from operating activities and from the Company's borrowing capacity. The cash
outlays include severance and outplacement costs, transition costs and capital
expenditures related to the plan. The success of the initiative may be dependent
on the Company's ability to retain existing employees and attract new employees
during the transition period. The Company's ability to effectively manage
inventories during the transition period may impact the operating results of the
Company.

In December 2000, a jury found that the Company's NIR(R) coronary stent
infringed one claim of a patent owned by Johnson & Johnson. Judgement has not
yet been entered. The Company could be found liable and owe damages of
approximately $324 million for past sales, plus interest, and additional damages
for sales occurring after the jury verdict. The Company expects to appeal any
adverse determination and post the necessary bond pending appeal.

On July 18, 2001, an arbitration panel determined that rapid exchange delivery
systems and balloon dilatation catheters sold in the U.S. by Medtronic AVE, Inc.
willfully infringe a patent exclusively licensed to the Company. The panel
awarded the Company $169 million in damages, as well as costs and attorneys'
fees, and a permanent injunction against Medtronic AVE's sales of the infringing
devices for the duration of the patent. On September 18, 2001, the U.S. District
Court for the Northern District of California confirmed the arbitration award.
On October 17, 2001, Medtronic AVE, Inc. appealed the confirmation of the award.

The IVT, EPI, CI and Quanam acquisition transactions involve earn-out payments
based on the acquired companies reaching certain performance and other
milestones. During the fourth quarter of 2001, the Company expects to make an
earn-out payment of $70 million related to its acquisition of IVT. The Company
does not expect to make any other significant earn-out payments during the
remainder of 2001.

Management believes it is developing a sound plan to integrate businesses
acquired in 2001. The failure to successfully integrate these businesses
effectively could impair the Company's ability to realize the strategic and
financial objectives of these transactions. As the health care environment
continues to undergo rapid change, management expects that it will continue to
focus on strategic initiatives and/or make additional investments in existing
relationships. In connection with these and other acquisitions consummated
during the last five years, the Company has acquired numerous in-process
research and development projects. As the Company continues to undertake
strategic initiatives, it is reasonable to assume that it will acquire
additional in-process research and development platforms.

Additionally, the Company expects to incur capital expenditures of approximately
$30 million during the remainder of 2001. The Company expects that its cash and
cash equivalents, marketable securities, cash flows from operating activities
and borrowing capacity will be sufficient to meet its projected operating cash
needs, including capital expenditures, litigation related payments,
restructuring initiatives, and the above-mentioned acquisitions and integration
of businesses.

The Company was engaged in negotiations to acquire Medinol prior to Medinol's
lawsuit against the Company earlier this year. In the event these negotiations
were to recommence, the Company may need to arrange additional financing
capacity to complete any potential acquisition of or other similar transaction
with Medinol. Although the Company believes it would be able to obtain
additional financing, there are no assurances that additional financing could or
would be obtained.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates among existing sovereign currencies and the
euro. On January 1, 2001, Greece became the twelfth member of the participating
countries that have agreed to adopt the euro as their common legal currency.
Fixed conversion rates among the participating countries' existing currencies
(the legacy currencies) and the euro have been established. The legacy
currencies are scheduled to remain legal tender as denominations of the euro
until at least January 1, 2002 (but not later than July 1, 2002). During this
transition period, parties may settle transactions using either the euro or a
participating country's legacy currency. The Company has addressed and/or
continues to address the potential impact resulting from the euro conversion,
including competitive implications related to pricing and foreign currency
considerations. In addition, during the third quarter of 2001, the Company
successfully completed the adaptation of its information technology systems to
be euro compatible.

Management currently believes that the euro conversion will not have a material
impact related to its overall business in Europe or elsewhere. The increased
price transparency resulting from the use of a single currency in the twelve
participating countries may affect the ability of the Company to price its
products differently in the various European markets. A possible result of this
is price harmonization at lower average prices for products sold in some
markets. However, uncertainty exists as to the effects the euro will have on the
marketplace.

LITIGATION

The Company is involved in various lawsuits, including patent infringement and
product liability suits, from time to time in the normal course of business. In
management's opinion, the Company is not currently involved in any legal
proceeding other than those specifically identified in the notes to the
condensed consolidated financial statements which, individually or in the
aggregate, could have a material effect on the financial condition, operations
and cash flows of the Company. Additionally, legal costs associated with
asserting the Company's patent portfolio and defending against claims that the
Company's products infringe the intellectual property of others are significant,
and legal costs associated with non-patent litigation and compliance activities
are rising. Depending upon the prevalence, significance and complexity of these
matters, the Company's legal provision could be adversely affected in the
future.

Further, product liability claims may be asserted in the future relative to
events not known to management at the present time. The Company has insurance
coverage that management believes is adequate to protect against such product
liability losses as could otherwise materially affect the Company's financial
position.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This report contains forward-looking statements. The Company desires to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of the safe harbor with respect to all
forward-looking statements. Forward-looking statements discussed in this report
include, but are not limited to, statements with respect to, and the Company's
performance may be affected by: (a) the Company's ability to timely implement
the global operations plan within its cost estimates, to retain and attract
employees as it implements its plant optimization initiative, to effectively
manage inventories during the plan's transition period and to achieve estimated
operating savings; (b) the Company's ability to achieve manufacturing cost
declines, gross margin benefits and inventory reductions from its manufacturing
process and supply chain programs; (c) the Company's ability to realize benefits
from the EPI, CI, Quanam, IVT and CPC acquisitions, including purchased research
and development; (d) the ability of the Company to manage accounts receivable,
manufacturing costs and inventory levels and mix, and to react effectively to
the changing managed care environment, reimbursement levels and worldwide
economic and political conditions; (e) the potential impacts of continued
consolidation among health care providers, trends toward managed care, disease
state management and economically motivated buyers, health care cost
containment, the financial viability of health care providers, more stringent
regulatory requirements and more vigorous enforcement activities; (f)
management's ability to position the Company to take advantage of opportunities
that exist in the markets it serves; (g) the Company's continued commitment to
refine existing products and procedures and to develop new technologies that can
reduce risk, trauma, cost, procedure time, and the need for aftercare; (h) the
Company's ability to develop and launch products on a timely basis, including
products resulting from purchased research and development and increased
research and development spending; (i) risks associated with international
operations; (j) the potential effect of foreign currency fluctuations on
revenues, expenses and resulting margins and the trend toward increasing sales
and expenses denominated in foreign currencies; (k) the Company's ability to
maintain its effective tax rate for 2001 and to substantially recover its net
deferred tax assets; (l) the ability of the Company to meet its projected cash
needs and obtain additional financing, if necessary; (m) the ability of the
Company to manage its relationship with Medinol during the pendency of the
litigation and the outcome of the Medinol litigation; (n) NIR(R) coronary stent
sales as a percentage of worldwide sales and the mix of coronary stent
platforms; (o) volatility in the coronary stent market, competitive offerings
and the timing of submission for and receipt of regulatory approvals to market
new coronary and peripheral stent platforms; (p) the Company's ability to
compete in the coronary stent markets; (q) decline of global NIR(R) coronary
stent market share as physician acceptance of the current NIR(R) coronary stent
platform erodes; (r) the development of competing or technologically advanced
products by the Company's competitors; (s) the effect of litigation and
compliance activities on the Company's legal provision and cash flow; (t) the
impact of stockholder class action, patent, product liability, Federal Trade
Commission, Medinol and other litigation, as well as the outcome of the U.S.
Department of Justice investigation and the adequacy of the Company's product
liability insurance; (u) the potential impact resulting from the euro
conversion, including competitive implications related to pricing and foreign
currency considerations; and (v) the timing, size and nature of strategic
initiatives and research and development platforms available to the Company.

Several important factors, in addition to the specific factors discussed in
connection with such forward-looking statements individually, could affect the
future results and growth rates of the Company and could cause those results and
rates to differ materially from those expressed in the forward-looking
statements contained herein. Such additional factors include, among other
things, future economic, competitive, reimbursement and regulatory conditions,
demographic trends, third-party intellectual property, financial market
conditions and future business decisions of the Company and its competitors, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Therefore, the Company wishes to caution each
reader of this report to consider carefully these factors as well as the
specific factors discussed with each forward-looking statement in this report
and as disclosed in the Company's filings with the Securities and Exchange
Commission as such factors, in some cases, have affected, and in the future
(together with other factors) could affect, the ability of the Company to
implement its business strategy and may cause actual results to differ
materially from those contemplated by the statements expressed herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, the Company is exposed to market risk from
changes in interest rates and foreign currency exchange rates. The Company
addresses these risks through a risk management program that includes the use of
derivative financial instruments. The program is operated pursuant to documented
corporate risk management policies. The Company does not enter into any
derivative transactions for speculative purposes.

The Company's floating and fixed-rate investments and debt obligations are
subject to interest rate risk. As of both September 30, 2001 and December 31,
2000, a 100-basis-point increase in interest rates, assuming the amounts
invested and borrowed remained constant, would not result in a material increase
in the Company's then current net interest expense.

The Company hedges its net recognized foreign currency transactional exposures
with forward foreign exchange contracts to reduce the risk that the Company's
earnings and cash flows will be adversely affected by changes in foreign
currency exchange rates. These foreign exchange contracts are not designated as
cash flow, fair value or net investment hedges under Statement 133. These
derivative instruments do not subject the Company's earnings or cash flows to
material risk due to exchange rate movements because gains and losses on these
derivatives offset losses and gains on the assets and liabilities being hedged.
These forward foreign exchange contracts are entered into for periods consistent
with commitments, generally one to six months.

In addition, the Company hedges a portion of its forecasted inter-company and
third-party transactions with foreign exchange forward and option contracts.
These contracts are entered into to reduce the risk that the Company's earnings
and cash flows resulting from certain forecasted transactions will be adversely
affected by changes in foreign currency exchange rates. However, the Company may
be impacted by changes in foreign currency exchange rates related to the
unhedged portion. The success of the hedging program depends, in part, on
forecasts of transaction activity in various currencies (currently the Japanese
yen and the euro). The Company may experience unanticipated foreign currency
exchange gains or losses to the extent that there are

timing differences between forecasted and actual activity during periods of
currency volatility. The Company had foreign exchange forward and option
contracts outstanding in the total notional amounts of $658 million and $452
million as of September 30, 2001, and December 31, 2000, respectively. The
Company recorded approximately $30 million of assets and $4 million of
liabilities to recognize the fair value of its contracts outstanding on
September 30, 2001, as compared to approximately $37 million of assets and $1
million of liabilities on December 31, 2000. Foreign exchange contracts that
hedge net recognized foreign currency transaction exposures should not subject
the Company's earnings and cash flows to material risk due to exchange rate
movements because gains and losses on these contracts should offset losses and
gains on the transactions being hedged. Hedges of anticipated transactions may
subject the income statement to volatility.

A sensitivity analysis of changes in the fair value of foreign exchange
contracts outstanding at September 30, 2001 indicates that, if the U.S. dollar
uniformly weakened by 10 percent against all currencies, the fair value of these
contracts would decrease by $51 million as compared to a $37 million decrease on
foreign exchange contracts outstanding at December 31, 2000. While these hedging
instruments are subject to fluctuations in value, such fluctuations are
generally offset by changes in the value of the underlying exposures being
hedged. As the Company has expanded its international operations, its sales and
expenses denominated in foreign currencies have expanded, and that trend is
expected to continue. Therefore, most international sales and expenses have
been, and are expected to be, subject to the effect of foreign currency
fluctuations, and these fluctuations may have an impact on margins. The
Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates does not factor in a potential change in sales levels or local
currency selling prices.

Although the Company engages in hedging transactions that may offset the effect
of fluctuations in foreign currency exchange rates on foreign currency
denominated assets, liabilities, earnings and cash flows, financial exposure may
nonetheless result, primarily from the timing of transactions, forecast
volatility and the movement of exchange rates.

PART II
OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

Note J Commitments and Contingencies to the Company's unaudited condensed
consolidated financial statements contained elsewhere in this
Quarterly Report is incorporated herein by reference.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Form of Amendment to Second Amended and
Restated Credit Agreement among Boston
Scientific Corporation, The Several Lenders
and The Chase Manhattan Bank dated as of
August 21, 2001.
10.2 Form of Credit Agreement among Boston
Scientific Corporation, The Several Lenders
and Banc of America Securities LLC dated as
of August 15, 2001.

(b) The following reports were filed during the quarter
ended September 30, 2001:

None.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on November 14, 2001.

BOSTON SCIENTIFIC CORPORATION

By: /s/ Lawrence C. Best
-------------------------------------------
Name: Lawrence C. Best
Title: Chief Financial Officer and Senior
Vice President - Finance and
Administration